What is a Business? (3.1) Flashcards
A business is…
Any organisation that makes goods or provides services.
Service :
Intangible things that the business offers.
What motivates people to start their own business :
- Flexible hours.
- Being their own boss.
- Creative freedom.
- Personal satisfaction.
Why do some start-ups succeed?
- USP.
- Gap in the market.
- Good planning, calculated risks.
- Realistic ideas.
Why do most businesses fail?
- Competition.
- No USP.
- Bad planning.
Consumer is the person who…
Uses the product.
Market :
Any place where buyers and sellers meet.
Adding Value :
The process of making the product more valuable to the producer.
- During each stage of the production process.
6 Ways of Adding Value :
- Speed + excellent service.
- USP.
- Product features and benefits.
- Branding.
- Quality.
- Convenience.
A business adds value when the selling price…
Of an item produced is higher than the cost of resources to make it.
Loss Leader :
Sell product/service for less than it costs to make.
Primary Production :
- Involves acquiring raw materials, e.g. metals and coal have to be mined.
(sometimes known as extractive production).
Secondary Production :
- Manufacturing and assemble process, it involves converting raw materials into components, e.g. making plastics into oil.
- Also involves assembling the product, e.g. building houses, bridges and roads.
Tertiary Production refers to…
- Refers to the commercial services that support the production and distribution process, e.g. insurance, transporting and advertising etc.
Hierarchy of aims :
- Mission statement and corporate aims.
- Corporate objectives.
- Functional objectives.
Aim :
Overall, what a business wants to achieve.
Mission Statement :
A mission of a business, it’s overall purpose or main cooperate aims (to motivate).
- Puts corporate aim into fancy words.
- Purpose, values and beliefs.
Corporate/Strategic objectives :
Goals of a business as a whole.
Functional (department) objectives :
Objectives for each department.
SMART stands for :
S - Specific.
M - Measurable.
A - Achievable.
R - Realistic.
T - Time specific.
6 Objectives examples :
Profit, growth, survival, cash flow, social and ethical.
- There needs to be a good balance between long-term and short-term objectives, to motivate people as they go.
Profit :
Financial gain that a business makes from providing goods and services.
- Occur when the revenue of a business is greater than the cost it incurs.
Profit formula :
Total revenue - Total costs
Total revenue formula :
Selling price x Quantity sold